Economists at Credit Suisse reaffirm their bullish stance on the Mexican Peso but also highlight that the strong CPI surprise is likely to lead to further two-way uncertainty around Banxico policy, and, therefore, warrants attention.

Hot CPI data surprise creates new two-way risks on growth and Banxico policy

“We remain constructive MXN, we hold on to our 18.50 USD/MXN target for Q1, and still favour fading rallies to the top of our range around 20.00.”

“The strong CPI surprise, however, creates two-way risks around Banxico policy expectations, especially with rising uncertainty around the near-term growth outlook and a new Banxico board member in place. These risks are well accounted for in risk premium terms, and do not change our MXN stance, but need nevertheless to be monitored carefully in the coming weeks.”